Accounting- How Find Bond Premium Amount?

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  • Accounting- How Find Bond Premium Amount?


Answer #1 | 23/12 2013 03:37
What is annual stated interest rate on the bonds ? To find the stated interest rate, look at how much cash is paid each interest period, in this case, annually. Next, find the face value of the bonds. You're told that the schedule shows the amortization schedule from issuance until maturity, and you know that at maturity the carrying amount is the face value, so the face value is $100,000 Each year, cash of $7,000 is paid, so the stated interest rate is $7,000/$100,000 = 7% p.a. ------------------- What is the amount of the bond premium on December 31, 2013? When a bond is issued at a premium, the carrying amount of the bond is the face value + the balance of the premium on bonds payable. On 12/31/13, the carrying amount was $101,833, and you know the face value was $100,000, so the premium on December 31, 2013 was $1,833.
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